CSR Activity through Trust, Society and Section 8 Companies

Corporate Social Responsibility literally means the responsibility of Corporates towards Society. Its an opportunity for big corporates to do their part to the society either voluntarily or through the compulsion under CSR.

Section 135(1) of the Companies Act 2013, deals with the CSR provisions and constitution of CSR committee.

Here we would be discussing the rules related to CSR activity done by Companies through registered Society, Trust or Section 8 Companies.

Modes of spending CSR expenditure:

As per Rule 4(2), Companies can spend on CSR activity through any of the below 3 ways.

1. Eligible Companies coming together to form a Trust, Society, or Section 8 Company for conducting CSR activities. Such Companies need not be subsidiary, associate or holding Companies. Unrelated Companies can also come together for this purpose

2. Companies can take up CSR activities through registered Trusts, registered Society, Section 8 Companies established by Central Govt, State Govt or under an Act of Parliament or a state legislature

3. Companies can also opt for undertaking CSR activities through registered Trust, registered Society or a Section 8 Company if below mentioned conditions are met

a. Such Registered Trust, Society or Section 8 Company has 3 years track record of conducting similar activities or programmes

b. Companies have specified the projects or programs as their object

c. Utilization of funds

d. Monitoring and reporting mechanism

Registration with MCA in CSR-1

As per Notification issued by MCA dated 22^nd January 2021, it is mandatory for all NGO’s who wish to raise funds through CSR activity to register with MCA with effect from 1^st April 2021 to get CSR funding. Registration is online through Form CSR-1 on MCA portal.

NGO’s to be registered through Form CSR-1 are:

(a) a company established under section 8 of the Act, or a registered public trust or a registered society, registered under section 12A and 80 G of the Income Tax Act, 1961 (43 of 1961), established by the company, either singly or along with any other company, or

(b) a company established under section 8 of the Act or a registered trust or a registered society, established by the Central Government or State Government; or

(c) any entity established under an Act of Parliament or a State legislature; or

(d) a company established under section 8 of the Act, or a registered public trust or a registered society, registered under section 12A and 80G of the Income Tax Act, 1961, and having an established track record of at least three years in undertaking similar activities

Conclusion

Based on the above details, it is conclusive that every registered Trust, registered Society or Section 8 Company who wish to conduct activities through CSR funding needs to be registered with MCA through form CSR-1.

This registration is applicable for both new companies which are being incorporated for this purpose and existing Trusts, Societies, and Section 8 Companies also. Effective date from when such registration applicable is 1^st April 2021. Also, to be noted is if the Companies eligible to spend CSR funds coming together to form Trust, Society or Section 8 Company then the condition is that such Trusts and Societies should obtain 12A and 80G certificate but 3 years track record is not required however if companies spend through any other Section 8 Company, a registered Trust or registered Society then such organization should have 3 years track record of conducting similar programmes and events to be eligible for CSR funding.